Morgan Stanley To Cap Cash Bonus At $125,000 (With Footnotes)

That after last year's abysmal performance on Wall Street, best summarized by the following quarterly JPMorgan Investment Banking revenue and earnings chart, bonuses season would be painful should not surprise anyone. But hardly anyone expected it to be quite this bad. The WSJ reports that Morgan Stanley, likely first of many, will cap cash bonuses at $125,000 and "will defer the portion of any bonus past $125,000 until December 2012 and December 2013" with bigger 'sacrifices' to be suffered by the executive committee which, being held accountable for the collapse in its stock price, will defer their entire bonuses for 2011. Morgan Stanley is likely just the beginning: "As banks report fourth-quarter results this month and make bonus decisions for 2011, total compensation is likely to be the lowest since 2008." This means that once Goldmanites get their numbers later this week, we will likely see a mass exodus for hedge funds which remain the only oasis of cash payouts on Wall Street. Alas, unlike the Bank Holding Companies, a series of bad decisions will result in hedge fund closure, as the TBTF culture will never penetrate the stratified air of Greenwich, CT. And with bonuses capped at about $80K after taxes, or barely enough to cover the running tab at the local Genlteman's venue, the biggest loser will be the state and city of New York, both of which are about to see their tax revenues plummet. And since banker pay is responsible for a substantial portion of Federal tax revenue, look for Federal tax withholding data in the first few months of 2012 to get very ugly, making America even more responsible on debt issuance, and likely implying the yet to be re-expanded by $1.2 trillion debt ceiling will be breached just before the Obama election making it into the biggest talking point of the election cycle.

But back to the sad fate of banker bonuses and tiny violins:

At Goldman Sachs Group Inc., which, like Morgan Stanley, reports earnings this week, many of the roughly 400 partners can expect to see their 2011 pay cut at least in half from 2010, according to people familiar with the situation. Pay for some employees in the New York company's fixed-income trading business will shrink by 60%, with some workers getting no bonus, these people said.

Morgan Stanley is likely to cut compensation by 30% to 40% for many of its traders and bankers, especially those who focus on fixed income. Stock trading and parts of investment banking will likely be spared from pay cuts, though they are liable to have bonuses deferred.Senior employees across the board will be affected by the changes in the makeup of the bonus, which for a Morgan Stanley or Goldman

Sachs trader can often outpace the continuing salary, according to the people familiar with the situation. The roughly 40 people on Morgan Stanley's management committee will see 85% of their bonuses deferred, a person familiar with the matter said.

The average of pay deferred, for all employees to whom it applies, will rise to about 75% from about 65% in recent years, this person said.

As for the footnotes:

The firm is taking a different approach with more-junior employees, or those without titles like managing director, executive director or vice president. Those employees, who often use their bonus money for day-to-day living expenses, will see only 25% or less of their overall bonuses deferred. Those employees who are paid less than $250,000 in overall pay won't have deferrals applied to their bonuses.

Of course, Wall Street workers may get paychecks this year from previous deferred bonuses. That will soften the blow somewhat from lower bonuses in early 2012. Morgan Stanley executives and many employees also receive part of their compensation in deferred stock.

Which brings us to another topic: namely the qualitative aspect of weekly initial claims (as opposed to just quantitative). Because while firings this year may have peaked at levels modestly lower than last year, it is the foregone paychecks which this year have soared compared to last year. Furthermore, with banks about to enter 6-12 months of global deleveraging as Basel III is knocking ever louder, the probability that many of the laid off bankers find a parallel job in the space is shrinking by the day. Which is precisely why we are very curious to see what TrimTabs tax withholding data indicates about the quality of terminations and lost jobs, because with the surge in banker layoffs and far lower bonuses, it is very likely that US tax revenues are about to fall off a cliff.

Hahahahah! It's finally time for those sorry pieces of scum to return their holiday gifts for a change! Hope you kept the reciept blowhards. I love success stories. Especially by those who don't cheat and steal.

BTW slewie, I'm sure you've read in serach of the miraculous? Right? Most diffficult lesson there and one you clearly keep falling/failing at : DO Not Display Negative Emotions". Right? I knew you felt like a flake re. the G teachings. It's all clear to me now.

From someone who in the past was close to them (and then rejected them).... their lifestyle basically is "spend on the now, and worry about the "then" as well as your "conscience" later"... basically, volatility is their game, hoping that the CURRENT winning spree will never end, while spending obscene incomes like there's no tomorrow.

Not incompatible with "working them like dogs".... the "middle class" of them, would basically imagine themselves as on the highway, when actually they're just controlled tools, disposable as soon as the surplus no longer satisfies their inefficient pay.

And nope, i'm not sorry for them..... good riddance, scum.

Unfortunatelly, i doubt that said "riddance" will happen at all, without a fight. For now, they're plain as simply whining........... cue central banks.

Well.... That's one way to curb the Wall Street extravagant pay packages. Not one the oligarchs had in mind, but it works for me. They'll have to recalculate all those multipliers of how much the 1%ers are superior in compensation to the rabble. So sad.

Imagine if there was some event that created a "game on" kind of situation where everyone had to come clean about their books as fast as possible. I don't know the events, certain prosecution, threat of death by hanging, something.

We'd all choke. It would also be great.

I have a feeling this collapse will not be such a disaster for all.

I hope you are doing well. How is your property coming along? Planning your garden?

Hey, Missy. I'm prepared for a medium sized "disaster". My spring garden will be done, but not to the extent it has in the past. The former years were for the practice, and for stashing some heirloom seeds. I'm confident that I can do what is needed, when needed, and protect my "investment". No more starting plants from seed again. I'm focusing on making life lighter and more mobile.

Understood. When the house was destroyed I was able to get to my bugout stuff quickly. It was a good thing and the fire drill told us we were not as prepared as we would have liked to be. We were quite cumbersome, but then again, we were trying to save as much as possible. My yard is a disaster but I hope to get it up and running this summer. Got to start where you are at. Davey Jones may have some ideas to share with me. Seems he is making his work 24/7/365.

The market is looking for a blow off top. Creeping up every day until the final short throws in the towel. After it's captured as much retail as it can on the long side as they can't resist the temptation. Then once that's happened this no volume market will plummet faster than Obummer's demigod approval ratings.

Heck yeah he did. I still wince at his delivery though. If only the average boobus amerikanus could learn to listen for the substance of the man's words, instead of the style. Lord knows the audience was jammed packed full of bloodthirsty neocon chickenhawks.

One of my favorite moments was the 'what do you think the proper income tax rate should be?' question. All the other scheisters casually batting figures around between 15-25% like that was some sort of huge deal. Ron Paul = 0%. TOUCHDOWN.

Update...liked Beck on Fox (for free! basicly). I listen to his radio show between 3 and 6 pm. when I am in my car. Today Beck tried to sell a "must see" (pay only) gbtv episode on the economy and it was total bullshit. The only reason I signed up was because of a free trial, and I now know why its FREE! Glad for the mention of ZH though!

I think so too. Copper just went through the roof. All on China stat fudging. But it was coming, they wanted to create USD weakness because the Yuan has been dumped on mass last few mths. Of course they are brain dead, they just get more inflation. China is scary.

What about the GSE pricks...how are they doing in the bonus department?

Here's a brief half-assed history on these bastards:

FRANKLIN RAINES [D] – FNMA CEO (1999 – 2004) Raines accepted “early retirement” from his CEO position while the SEC pretended to investigate accounting irregularities. Fannie’s own OHFHEO also accused him of abetting widespread accounting errors, including the shifting of losses, so he and his fellow execs could “earn” large bonuses. The WSJ reported back in 2008 that Raines was one of several cronies that received below market rates for mortgages from Countrywide. Raines alone receive loans for over $3 million while CEO of FNMA. Raines’ compensation for his “work” at FNMA - $90 million.

RAINES GRADE – F

DANIEL MUDD [R] – FNMA CEO (2005 – 2008) Before becoming CEO of FNMA, Mudd worked at the Office of the Secretary of Defense, was an advisor to Asia-Pacific Economic Corp., “served” on the board of the Council of Foreign Relations, “consulted” at the World Bank, and held many positions at GE Capital including president and CEO. Mudd was dismissed as CEO of FNMA when FHFA became conservator in 2008. In 2011 Mudd and other GSE execs were charged by SEC with securities fraud. After his career at FNMA Mudd became CEO of a NYC hedge fund named “Fortress”. Fortress invested in purchasing tax liens on delinquent property taxes from local governments under many benign corporate names such as “Pleasant Valley Capital” and “Travis Farm Investments”. Cozy. Mudd’s compensation for his “work” at FNMA - $80 million.

MUDD GRADE – F

NEEL KASHKARI [R] – FNMA CEO (Tenure is murky) Kaskari was a former investment banker for Goldman Sachs, was tapped by Hank “The Shank” Paulson to lend his skills over at TARP HQ, and now rather ironically, continues God’s work as a Managing Director at PIMCO. Kaskari’s compensation for his “work” at FNMA is also murky; I’ll just assume it was too much.

KASHKARI GRADE - F

HERB ALLISON [D] – FNMA CEO (2008 – 2009) The esteemed Mr. Allison was quickly whisked off to oversee the wildly successful TARP program. I didn’t find much on his compensation during his brief stint as FNMA CEO. Allison served in various positions at Merrill Lynch and became a member of the board in 1997. He was a director of the NYSE from 2003 – 2005.

ALLISON GRADE – F

MICHAEL WILLIAMS [?] – FNMA CEO (2009 – Jan 1, 2012) Mr. Williams is a 20 year veteran at FNMA. While “serving” as FNMA CEO, Williams managed to scrape by on less than $6 million in 2011 alone. This could and should be considered a hardship, given the complexities involved in purloining ~ $60 billion of Fed bailout money.

Charles (my friends call me “Ed”) Haldeman has announced his retirement plans but intends to be a good sport and stay on with insolvent FHLMC until another crony can be found to fill his wing-tips.

That might take a while. “Serving” as CEO of the ultimate backstops for the lion’s share of the MBS Ponzi is very stressful.

We’ll have to accept former Freddie exec David Kellermann’s testimony posthumously. Mr. Kellermann was found hanging by the neck in the basement of his posh Vienna, VA home in the affluent suburb of Washington. D.C. way back in April of 2009. It is presumed he had no help and local police have stated there was no evidence of foul play.